Relationships between Natural Gas Production in Persian Gulf States and Natural Gas Consumption in the European Union

Qatar, Saudi Arabia, United Arab Emirates, Iraq and Kuwait hold abundant natural gas reserves. This study examines the long-run and short-run relationships between natural gas production in the five Gulf states and consumption in the European Union (EU). The data consist of yearly time series covering the period from 1970 to 2012. We tested for cointegration and the Granger causality in a first-differenced VAR. The tests did not indicate a long-run equilibrium or any short-run dynamics. We suggest that the Gulf states have a huge potential to increase and establish a stable gas supply to the EU.